Bond markets started the day in stronger territory, but well-within the range set by Friday's trading.  Treasuries took cues from Europe amid limited domestic volume.  The light trading conditions also left the daily Fed buying to count for a bigger piece of the action.  As such, we saw yields stay low heading into 10:15am and then begin rising.  This coincided with late day weakness in European bond markets after comments from an ECB governor downplayed QE prospects. 

Bond markets weakened at a medium-fast pace through 1:15pm and flat-lined from there.  Fannie 3.5s held the same supportive level that marked the lows from Friday (102-18) and moved up to 102-21 as the day winds down.  Even though this is still technically 'positive territory,' most lenders repriced due to the gap from the higher prices in the morning.

10yr yields are in a precarious spot at 2.47.  This is right on the upper edge of a long-term inflection point.  As noted in this morning's commentary, 10yr yields have only ever moved up and decisively through this range one time in the past 4 years.  Realistically, the entire range between 2.3 and 2.5 is a "precarious spot" in the bigger picture.  With the exception of the excessive volatility in 2009, yields have only crossed this zone once on the way lower in 2011 and once on the way higher in 2013.